From “China may finally be slowing” by Daniel Melser and Sherman Chan, Moody’s Economy.com, 16 October, 2007:
After nearly three years of accelerating growth – to a high of 11.9% last quarter – the tipping point looks to have been reached and growth is expected to moderate slightly. Moody’s Economy.com sees China’s GDP expanding 11.4% in the third quarter, with a reduced stimulus from trade and higher prices cutting into retail spending. Trade data for the September quarter were strong; the trade surplus rose 50% year-over-year. This is not quite as powerful as in the second quarter, when the trade surplus rose an incredible 75% from the same period a year earlier. This will be the primary reason for a slight slowing in GDP growth. Whoever takes the reins at the central bank [after the Party Congress] will almost certainly continue to raise interest rates and tighten reserve requirements. With growth strong and inflation continuing to run wild, there is every reason to continue tightening monetary policy. But efforts must also focus on the bank’s meager deposit rate, currently just 3.87%. The slack yield on deposits has driven funds into the stock and property markets, creating perhaps China’s largest problem: asset price bubbles.
From “PBOC raises RRR for 8th time” by Jun Ma, Deutsche Bank greater China chief economist, October 15, 2007:
The reserve requirement ratio (RRR) will be raised by another 0.5% effective October 25. This is the eighth increase this year, which will bring the RRR to 13%. This move reflects sustained pressure for mopping up liquidity from the banking system. In addition, despite the deceleration in export growth in recent months, the trade balance remained at a stubbornly high US$24 billion in September. Echoing these challenges, the most recent quarterly report of PBOC’s monetary policy committee indicated that the monetary authorities should “appropriately strengthen policy adjustment.” We read these messages as suggesting one or two more increases in RRR and another rate hike of 27 basis points this year.
From “Hong Kong: Keep them coming” by Sean Yokota, UBS economist, October 8, 2007:
How much impact do mainland tourists have on Hong Kong’s economy? Have we already seen the best? If we compare to experiences in Korea and Taiwan, mainland residents still have a lot more travelling to do. China’s GDP per capita today is much lower compared to the neighboring countries when their travel growth peaked. Outbound travel in the neighboring countries peaked when GDP per capita was around US$5,000 and US$6,000. China’s real GDP per capita in 2000 prices was US$1,600 in 2006. The peak appears years away. Second, the [mainland] individual visitor scheme does not apply to all mainland residents. It is implemented in 44 mainland cities, and the Hong Kong Tourism Board estimates that it applies to 220 million mainland residents. Millions still have difficulties travelling abroad. As these restrictions ease, departure growth should steadily increase.
